Sustainability is embedded across Novozymes’ operations
Novozymes is a company that takes long-term thinking very seriously. Its purpose is Together we find biological answers for better lives in a growing world. Let’s rethink tomorrow. It’s big, bold and firmly fixed on the future.
It is a purpose that is firmly reflected in its corporate reporting. According to Harvard Business School, the Denmark-headquartered biotechnology company, which was founded in 2000, was one of the first corporates in the world to do integrated reporting. And it was the first to tie its strategy and targets into the UN’s Sustainable Development Goals (SDGs). It is ahead of most companies in thinking ahead.
‘Just ten years ago, business was seen as a problem for sustainability, for the environment and for the general public,’ says Claus Stig Pederson, head of corporate sustainability at Novozymes. But then a lot of things started happening: huge companies like P&G, Unilever and Walmart jumped on the sustainability wagon.
Walmart’s Project Gigaton, which launched two years ago, is an initiative to remove one billion metric tons (a gigaton) of greenhouse gases from its global supply chain by 2030.
‘Those companies are our customers, so it was very important for us to be able to report on what we were doing to ensure our solutions are sustainable and fit for business,’ he says. The primary focus of the company’s reporting was to show it could integrate sustainability into business functions, connecting better with external stakeholders and the things they care about and integrating those perspectives into the way Novozymes did business.
‘Now I see a change in both our business priorities and how we report on things – it’s about how we build the business to have the strongest muscle to help make the world a better place. So how we innovate solutions that deliver positive contributions to the environment and make a business profit at the same time.’
Pederson admits that when he joined Novozymes in 2006, the company had a profit-only ambition. ‘There were high sustainability standards but I think it’s fair to say they were not strategic; they were focused on keeping the house in order and not used for the benefit of the business,’ he says.
A lot of Pederson’s work, therefore, was about injecting sustainability into all corners of the business, finding out where the company could add value, using sustainability in sales and marketing dialogue with customers, and engaging with investors on these issues to make them more interested in the company.
His efforts proved so successful that in 2015, Novozymes declared that sustainability would be its company purpose and collaboration its strategy. ‘I can’t claim all the credit,’ says Pederson. ‘But I certainly played a role in helping the company understand that connecting to the sustainability agenda could be purposeful, powerful and valuable both in the short and long-term.’
More recently, reporting at Novozymes has taken a further step with strategy and targets tied into the UN’s Sustainable Development Goals (SDGs). ‘We got engaged back in 2012, at the UN Summit in Rio, when the UN opened the doors to business and invited us to join in the process of developing these goals,’ says Pederson. ‘And we got really motivated by that because we believed that in collaboration with the UN, governments and NGOs, we could get it right and help fix the planet.’
When Novozymes launched its third corporate strategy development process in 2015, the draft goals were the inspiration. ‘We were really excited – we could see a long list of fantastic opportunities for a company like Novozymes to innovate solutions that would have political support and tailwind.’
Novozymes’ approach has turned long-term reporting on its head. Most companies looking at longer-term thinking begin by assessing how their products and services could be applied to a longer time frame – taking into account environmental and market challenges, for instance.
At Novozymes, the thinking starts with the long-term societal and environmental needs, followed by the formulation of objectives that can help meet them. ‘We used sustainability to understand our innovation pipeline better. I thought we would find developments that would have to stop because they would not take things in the right direction,’ says Pederson. ‘But it actually helped us highlight those that could have a super big impact, and we were able to partner with the right people to create that impact fast.’
He also thinks it has proved how sustainability arguments can be an important tool to attract partners who can help accelerate innovation. Novozymes still publishes quarterly reports, which might seem surprising given its long-term approach. Pederson admits that getting rid of them has crossed their mind, but there’s been no serious conversation – ‘maybe we should do it just to send some signals,’ he laughs. But the fact is there’s been no need to take that step – the long-term approach is so embedded in the company’s thinking and operations, that they just don’t get it is the way.
If there is a challenge, Pederson agrees that it is not all investors care and engage in the sustainability agenda. ‘Maybe it’s just the top ten investors and customers who really understand and of course if everyone did, it would really move the needle. Then real sustainable business would be mainstream. I hope we are getting there, but we are not there yet.’ He thinks the SDGs will be an important tool to help get business to understand what it being asked for and get there quickly. ‘The goals are a fantastic framework and guidance on where to go, what to invest in and what to innovate for.’
Many companies are reluctant to deliver long-term reports because they think it means sharing company secrets. ‘But there’s so much more that we can share than we believed just a few years ago without getting into trouble,’ says Pederson. ‘The world is hyper transparent anyway, so much has changed. There’s now a lot more openness, a willingness to open the books and share. By better understanding the landscape in which we do business, we will be more competitive, robust and successful. How you report is the way you reflect that willingness to open up?’
His advice to other companies is to really spend time understanding how your company’s core competencies meet the real needs of people today and into the future. ‘When they take the helicopter and look at how their core competencies meet people’s needs, many might be surprised and find completely new ways of looking at themselves,’ he says.
‘It’s about going beyond the product and looking at the service it provides. The product is just the instrument to servicing society.’ For some companies this approach might mean they end up changing their pathway because the product is not what society needs in the long run. ‘But then it’s a good idea to find out early and change direction while you still have money in the bank.’
‘I think it’s all about finding out how you can solve societal problems with a business model – this is how businesses can do something meaningful and purposeful resulting in happy employees, customers and investors. Making money to do the right things is the future of business.’
It’s big thinking that many companies may not yet feel able to sign up to – how many could currently say they understand their business purpose, let alone live it? But for those that get it right, it changes everything – not least making long-term reporting a whole lot easier.